About 570 jobs will be lost as CooperVision (CVI) closes its contact lens manufacturing facility in Norfolk, Virginia, over the next 15 months. The plant makes about 7 percent of the company's total contact lenses, but is being phased out because of «increased manufacturing efficiencies.» Production of contact lenses will be moved to facilities in Puerto Rico and the U.K. Some of its production in Australia will also be moving to the U.K.
The restructuring program is expected to result in charges of $25 million, mostly for the next fiscal year, and will result in annual savings of $14 million from 2011. It should boost earnings by $7.5 million in 2011 and by $15 million a year after that. The company has already eliminated almost 700 jobs in the last year alone, and with this measure, it will have eliminated 1,250 positions, 29 percent of its former global manufacturing staff.
CVI, which is the contact lens division of the Cooper Companies, had a net sales increase of 2 percent to $240.9 million in the third quarter ended July 31. This represented growth of 3 percent on a currency-neutral basis. The gross margin fell by 6 percentage points to 49 percent, largelyt because of the Norfolk shutdown, while the operating margin of 12 percent was the same as last year. By category, revenues from multifocal contact lenses rose by 7 percent to $16.6 million, a 14 percent increase at constant currencies. Sales of single-use spheric lenses climbed by 8 percent to $50.1 million, or by 9 percent at a constant exchange rate. However, CVI's sales of toric lens sales fell by 10 percent in the period to $75 million, a drop of 4 percent at constant currencies, and most of the drop was in the U.S.. Other contact lens types dropped by 1 percent to $99.2 million, but this was growth of 6 percent at constant currencies. CVI's sales in Europe dropped by 1 percent to $90.7 million, but with a 7 percent increase on a currency neutral basis. Turnover from Asia-Pacific grew by 16 percent to $44.5 million, just 5 percent at constant currencies. Sales in the Americas were flat in the quarter, at $105.7 million.
In terms of individual product lines, global sales of Proclear products rose by 3 percent to $69.7 million, or an increase of 11 percent on a currency-neutral basis. Silicone hydrogels jumped by 73 percent to $31.8 million, an 84 percent rise in constant currencies, and the company is now certain to outperform its previously stated annual target of $100 million in this category.
Generally, CooperVision outperformed or kept pace with the overall contact lens market at constant currencies, scoring better than Ciba Vision or Vistakon. Regionally, it stayed even with the market in the Americas, and more specifically the U.S., both of which dropped by 1 percent, and in Europe, where the market grew by 6 percent in the latest quarter in terms of local currencies. In Asia-Pacific, the market fell by 1 percent, but CVI posted 3 percent growth.
The global market for soft contact lenses grew by 1 percent in the quarter, while the company expanded by 2 percent. In the first half of the year, the global market climbed by 2 percent, while CVI rose by 4 percent.
By category for the quarter, single-use spherical lenses worldwide rose by 1 percent, but CVI posted 14 percent growth. In silicone hydrogels, the market increased by 16 percent, while CVI boomed, jumping by 81 percent. In some categories, however, CVI fell behind. For torics, the global market increased by 4 percent, but CVI saw a drop of 5 percent, though in a statement the president and chief executive, Robert S. Weiss, said that the company's new Biofinity toric lens was very well received in the U.S.. For multifocals, the difference was smaller, with the worldwide market growing by 17 percent, and the company expanding by 14 percent.
CVI's parent, The Cooper Companies, had total net revenues of $285.2 million, up by 2 percent (4 percent up in constant currencies). Net income in the period was up by 22.3 percent to $21.9 million. The overall gross margin fell by 5 percentage points to 51 percent, largely because of charges related to a recently announced reorganization of manufacturing operations at CVI as well as inventory and equipment write-offs and idled equipment. The group generated strong free cash flow of $56 million in the quarter.
For CVI, the company is forecasting revenues of $230 million to $240 million in the fourth quarter, and $900 million to $910 million for the full fiscal year. Sales grew by 5 percent in August. Weiss noted that the division is working to improve capacity utilization ? and thus gross margins. He expressed confidence that the gross margin will be higher than 60 percent after the next financial year.